Auto sectors gearing up for a bumpy ride

The auto sector is saying its prayers. Sample this: Maruti Suzuki India, which sells more than half the cars sold in India, witnessed a growth of 15% Y-O-Y in October last year, followed by a robust 24% in November. But this year, a measly growth of 5% in September suggests that the passenger car industry is in for a jolt.

GM India V-P P Balendran says, ���We are not expecting any growth at all this festive season.��� And a glance around the industry shows that true to Balendran���s word, schemes and offers are not being upgraded and automakers are mainly banking on new launches to sustain customer interest.

A spokesperson of Hero Honda Motors, India���s largest manufacturer of two-wheelers flatly said: ���We are not going to offer any discounts or freebies in the coming months though you can expect new product launches.��� But the point to be noted here is that Hero Honda has shown consistent growth over the last six months, with a substantial growth of 28% Y-O-Y in the last month. So, why isn���t the bike maker keen to offer freebies?

A source pointed out that the growth figure appeared big because last year, due to the nerve wracking slowdown in the two-wheeler market, the base on which the growth has been calculated is small. And this seems to be true for almost all two-wheeler manufacturers.

So, what can customers expect? ���I am still not undermining the possibility of freebies and discounts,��� says Abdul Majeed, auto analyst and partner, PriceWaterhouse. ���Some of the OEMs have cut down on production. Carmakers are likely to offer more discounts in the B and C segments. And as for two-wheelers, you can expect some of them to push their dealers hard to clear stocks. And the Nano is also a threat to them.���

Majeed���s prediction might come true, but at the moment, new launches seem to be the flavour of the season. Almost all automakers such as, HM Mitsubishi, Honda Siel, Toyota Kirloskar, Maruti Suzuki, Tata Motors, Bajaj Auto, India Yamaha, Hero Honda are banking on new products to tap into the festive season ahead.

Maruti is launching its A-Star in November. Honda Siel and Toyota have already re-launched two of their best selling sedans. Tata Motors is banking on its new Indica Vista. Mitsubishi is launching its compact SUV, the Outlander and Yamaha is ready with the FZ 16, a bike that it feels can turn around its fortune in this country.

So, the new launches are ready but will the automobile sector gain from it? Ian Fletcher, automotive analyst at research firm Global Insight in London, seems doubtful.

He says, ���It will be up to the traditionally strong festive month of October, which includes both Dussehra and Diwali, to offer some gains before the end of this year. But we expect growth to be lower than that seen last year and as a result, further declines could be seen before the end of the year.���

With regards to incentives, Fletcher feels that automakers have tried to offset the inflationary pressure as well as price increases by offering discounts but this seems to have had little effect. ���Most probably because there have been so many incentives offered in the past they could well have lost the positive effect they could have had,��� says Fletcher.